Tax loss selling candidates from a National Bank strategist

Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow

Opportunities

National Bank strategist Daniel Straus identified candidates for tax loss selling (while warning that all investors need to speak with a tax professional before attempting the strategy),

“This strategy involves selling a security that is down materially year-to-date to capture the loss for tax purposes. The benefit is that losses can be applied against realized capital gains, can be carried back three years, or carried forward indefinitely … To recognize a capital loss in calendar 2025, the last day for tax-loss selling is December 30, so that the trade settles before the year-end (the IRS uses trade date rather than settlement date to determine the tax year, but Canadian taxpayers should still follow Canadian rules). Investors would be required to wait 30 days after the sale before buying the stock back to preserve the tax loss in accordance with CRA and IRS tax requirements”

The stocks, which include some with significant drawdowns despite positive year to date results, are: Alimentation Couche-Tard Inc (ATD-T), EQB Inc (EQB-T), goeasy Ltd (GSY-T), BHC Bausch Health Cos Inc (BHC-T), Air Canada (AC-T), ATS ATS Corp (ATS-T), Cargojet Inc (CJT-T), MDA Space Ltd (MDA-T), TFI International Inc (TFII-T), Thomson Reuters (TRI-T), CSU Constellation Software Inc/Canada (CSU-T), Descartes Systems Group (DSG-T), CGI Inc (GIBA-T), Lightspeed Commerce Inc (LSPD-T), Ivanhoe Mines Ltd (IVN-T), Methanex Corp (MX-T), West Fraser Timber Co Ltd (WFG-T), Altus Group Ltd/Canada (ALF-T), Allied Properties REITs (AP-U-T), Canadian Apartment Properties REIT (CAR-U-T), FirstService Corp (FSV-T), and Boralex (BLX-T).

I don’t have room to list them, but Mr. Straus listed ETF candidates for the buyback portion of the tax strategy.

Real estate

A weaker domestic housing market is seen as only a minor headwind for the major banks, according to Scotiabank analyst Mike Rizvanovic,

“More downward pressure on home sales: Home sales across Canada declined by 4 per cent year-over-year, remaining below historical levels for the month of October (down 6 per cent and down 3 per cent, respectively, vs. the previous five-year and 10-year average). Among the large regions, the Greater Toronto area (GTA) and the Greater Vancouver area (GVA) fell 8 per cent and 14 per cent year-over-year, respectively, while Montreal outperformed (up 5 per cent year-over-year). Other large cities were mostly lower, including double-digit declines in Calgary and Edmonton. The dollar volume of transactions in Canada, which we use as a proxy for mortgage origination, was down a modest 1 per cent month-over-month in October and on a trailing-12 month basis remained well below peak levels in 2022 (down 31 per cent) … inventory levels improved across large cities, which should help placate concerns around excess supply, while key economic indicators remain stable, supporting our view that credit risk within the portfolio is very well contained. We continue to see a softer mortgage market in Canada as only a modest, and manageable revenue headwind for the large Canadian banks under our coverage”

Mr. Rizvanovic has “sector outperform” ratings on Canadian Imperial Bank of Commerce, National Bank of Canada and Royal Bank of Canada.

Growth patterns

Deutsche Bank chief strategist Binky Chadha uses management earnings calls to uncover patterns in profit growth for both winners and laggards,

“The winners in areas tied to AI, power, aerospace and defense, and travel, etc., continue to report very strong demand, characterizing it variously as exceptional, excellent, tremendous, outstanding and incredible. Carnival said their business is “continuing to fire on all cylinders” while Parker-Hannifin said they had “just a fantastic quarter.” However, many did point to being constrained by a lack of adequate supply. Exelon Corp, for example, said that the “demand for power is not slowing down” but that the “supply challenge is real” while Western Digital forecasted that 2026 will continue “to be very supply constrained.” Hexcel was more optimistic however as they are “clearly seeing growing momentum as past supply chain constraints subside.” … Amongst companies tied to areas which have been under pressure, such as consumer goods, housing, autos, chemicals and broad manufacturing, some saw pockets of improvement in demand, but most are yet to see a meaningful inflection higher. They have instead relied on self-help or market-share gains. For Kraft Heinz, “the consumer negativity and the sentiment extended longer than we had originally expected,” and Sherwin-Williams described a “demand environment that remains softer for longer” while Packaging Corp of America said they are “not getting a lot of lift, obviously, from the economy.” Mohawk believed that though “economic conditions across our regions weakened more than anticipated,” they “outperformed in most of our markets,” a view echoed by 3M who said that “macro trends remain soft and largely unchanged” but “due to our strong execution, we are outperforming” while Fastenal said they would “characterize our growth as mostly self-help and market share gains rather than any particular macro lift.””

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